PACRA Upgrades the Entity Ratings of The Bank of Punjab

The Bank of Punjab's ("BoP" or the "Bank") rating upgrade rests on two pillars: a markedly strengthened standalone credit profile and the Bank's increasingly indispensable role in the Government of Punjab's (GoPb) broader economic and development program. This stems from the fact that the Bank is majority-owned and controlled by the provincial government. BoP crossed the PKR 2trln deposit mark by end-2025. While public sector deposits remain a major contributor, private sector deposits have also grown substantially, comfortably surpassing PKR 1trln on their own. This improved mix reflects genuine franchise depth and a broadening retail and commercial relationship base, rather than reliance on public funds. Current account deposits have likewise expanded, with average current account balances rising steadily over the last couple of years. The cost of funds, once a constraint on the Bank's profitability, has eased meaningfully following a revised pricing structure. As a result, BoP has avoided the sector-wide trend of margin compression, instead posting expanding net interest margins and a rising trajectory in core profitability. A central driver of the upgrade is BoP's deepening integration with the GoPb's economic development initiatives. Beyond providing funding stability, this relationship is reflected, among other things, in three major parallel financing programs that are reinforcing the Bank's franchise depth and diversifying its earning asset base. Under the housing finance initiative (Apni Chhat Apna Ghar), the program, executed through partner institutions, has supported over 121,000 borrowers, with total exposure reaching PKR 155bln as of end-2025, underpinning a formidable position in retail mortgage lending. In agriculture, the Kissan Card and Livestock Card schemes have materially expanded financial inclusion, bringing a large new borrower base into the formal financial system while strengthening the Bank's presence in an underserved but strategically important segment, supported by a clear technological edge in origination, disbursement, recovery, and monitoring. Similarly, the Asaan Karobar Finance Scheme, launched in January 2025, has significantly advanced the Bank's SME penetration, capturing 11% of national SME outstanding credit and 37% of total SME borrowers. This has been underpinned by the fully digital Asaan Karobar Card, with disbursements exceeding PKR 44bln across more than 104,000 borrowers. Complementing these structural franchise improvements, BoP's financial performance in CY25 reflects a meaningful improvement in earnings generation and overall balance sheet strength. On the balance sheet side, an improving deposit mix contributed to a sharp reduction in the cost of funds. Gross advances grew 12% YoY to PKR 926bln, reflecting sizeable deployment into higher-yielding assets and an improved asset mix. Equity strengthened to PKR 104.1bln (CY24: PKR 92.5bln), providing an adequate buffer for growth and risk absorption. On the income statement side, net interest income rose 83.6% YoY to PKR 81.1bln, driven by favorable repricing of liabilities; this, alongside a higher share of low-cost deposits, supported margin expansion. Operating efficiency also improved, with the cost-to-income ratio declining to 59.6%, reflecting the benefits of automation, digital transformation, and process optimization initiatives. Going forward, the management has devised a strategy to improve its positioning in overall performance, including trade business, while enhancing its footprint in the broad financial spectrum of the country. The Bank has also devised a capital management policy to ensure a strong cushion over and above the regulatory requirement.
Continued growth in key performance parameters is essential for future ratings. A seamless governance framework and independence in decision-making will be essential. Ongoing improvements in earnings diversification, in trade and digital advancements, is important.

About the Entity
The Bank of Punjab, established under the BOP Act 1989, is listed on the Pakistan Stock Exchange (PSX). The GoPb holds a majority stake of 57.5%, while the remaining shareholding is widely dispersed. The Bank is governed by an eight-member Board of Directors. Mr. Zafar Masud, a renowned banker and current Chairman of the Pakistan Banks Association, serves as the President & CEO of the Bank.